Electronic Data Interchange (EDI)
Electronic data interchange (EDI) can be defined as the electronic exchange of data in highly specified formats that takes place typically
between organizations. Some of the different types of transactions that can be done through EDI include (a) requests for quotations, (b) purchase orders. (c) acknowledgments and confirmations, (d) invoicing. and (e) payment . While the use of EDI is very fast and efficient. it does have everal shortcomings. First, companies must pain ta kingly link their operations to a specific EDl software and then synchronize protocols ( such as which version of the software they use) with the firms with which they want to conduct business. The format for EDI is very inflexible and often does
not adapt well to new applications. In addition, EDl moves data in batch mode and. consequent
then? i a time delay from hen the data are sent to when they are actually received
(although it is still much faster than non electronic methods). For example. at Boston Scientific's Customer Fulfillment Center in Quincy, Massachusetts, incoming EDI orders from customers are accumulated in batches and downloaded for processing every 30 minutes.
In addition. EDl transmissions typically take place through a third party such as General Electric Information Systems that is referred to as a value-added network (VAN). The cost of using a VAN can be quite expensive, often into the $1O,OOOsper month for medium
to large companies. . Because of the many shortcomings and high costs of EDl, the extranet will most likely
replace EDl in the future as a medium of communication. This is already happening with many firms that are now connected electronically with their suppliers through an extranet.
These suppliers now need only an extranet connection and a web browser in place of the. dedicated EDl software and connections to a VAN.